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Smithfield 28, United States 22, U.s. 21, America 10, Us 9, Madam 8, Dr. Haley 4, Slane 3, The Usda 3, Mr. Slane 3, Michigan 2, Cochran 2, Mr. Pope 2, United 2, Japan 2, Usda 2, Unocal 1, Wong 1, Grassley 1, Robert 1,
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  CSPAN    Public Affairs    News  News/Business.  

    July 12, 2013
    7:00 - 8:01pm EDT  

conversations since then. >> thank you. >> yes or no, could it happen in reverse? >> i don't know. i do know that china's amazing growth since 1978 came in basic sense by the government getting out of the business of running business. they had a complete command of the economy for decades, it's a work in process. >> okay. >> [inaudible] >> you have to turn the mic on, thank you. >> it would happen. that same question was raised in a blog, and they said no there as well. the reason is it's strategically important industry, and as most people in china know, the power of the state has been increasing vis-a-vis private interest in china as a pork proportion. >> okay.
commissioner, could it happen in reverse? >> absolutely not, madam chairman. >> okay. i have another question. i do want to say that one of the things said was concerning to me. i heard this correctly. you were saying that we have issues of intellectual property theft with china. it's not a secret. it's been a huge issue in all kinds of industries, manufacturing, and so on, but then you said the ideal solution to the problem of ip theft is this situation which does that mean do you think the ideal solution is for china to buy our companies and have our intellectual property? >> no, senator. the point is right now we know that hundreds of thousandses if not millions of american jobs are lost because of ip theft in china. >> j is it ideal? why is having a chinese company buying and american company -- that's the solution? to ip theft?
>> around the world, including the united states, there's an active market among companies for the exchange of ideas so companies create ideas through their research and development and innovation efforts and deploy them themselves, but the motivation for transactions in the company gains ideas of others. having market mediated transactions is preferable to theft. >> absolutely. i would suggest following the rules is preferable to theft as well. let me ask one other thing returning to the colleagues, and that is, we've been told that they want to buy smithfield because they need more pork and want it sourced from the united states, but if that were true, if that were true, american producers would be happied to do that today, right now. our pork producers in michigan would be more than happy if they would be allowed to sell into china, which they do not, and
there's an integrated facility, business, and we spend 23 million a year to promote meat exports, but we cannot open the chinese market that use illegal, unscientific food safety standards to block both pork and beef. i'm all about exports, a member of the president's export counsel, i want to see us export our products, but it seems to me, removing the unfair barriers in china would be a lot quicker and more efficient than just saying that the only way we can get in is if they own our companies. that don't make sense to me. commissioner, from your perspective, you know, if you might speak about this? >> yes. madam chairman, this is really all about control, and the chinese could buy pork on the market. the problem with that is they subject themselves to huge price
increases and learn in the iron ore and coal business is it's better to buy the mines than just the ore. here, what they have found is that multinational, vertically integrated meat processing companies have a cost in price advantage, and in so, they have told their domestic industries, to go out and find the companies and acquire them. this -- this is all about trying to control the price of pork and at the same time getting the value added benefit by. >> i'm over my time, thank you. >> the reaction to the last witness is there are many more negative factors that should be considered in the committee than positive ones if this merge r and acquisition goes through. is that an inaccurate -- >> no, i agree, senator.
the end game from the chinese point of view is ultimately to dominate our domestic pork market, and what they will take smithfield's technology and integrate it into china. they're converting from backyard production to industrial scale. they need the tornado -- technology for handling, genetics, meat cutting, that sort of thing, and the history is that once they digest all of this, and they get their industry up, they'll start to try to export pork to us. the end game is to ultimately dominate in the long term. >> well, if you were serving as a member of the u.s. senate, would you consider this to be in the public interest of the united states or not? >> no. i would not. i think that -- there's four problems here as i see it in i proving the transaction. number one problem is that if this transaction is approved, how do you stop other chinese
companies from coming in, buying our food processing companies in the united states? for example, costco is the chinese's largest grape trading company in china, and in the state owned entity, they publicly announced they are seeking acquisitions of u.s. companies, so if this is approved, i don't know how you stop other state owned and state controlled companies from coming in and buying our food companies. the second thing that offends me is that they can buy our companies, but we can't buy their companies, and, you know, there's just something really fundment tally wrong with that, and i think that the end game is to dominate our markets, and that bothers me, and the final thing is that what we're doing here, if this is approved, is
you're importing a radically different economic system, a system in which we have free markets, and that's a potential of conflict as i see it. for those reasons, i'm opposed. >> yeahment do you know of anybody who's for it? >> sorry, sir? >> do you know of anybody in favor of the transaction being approvedded? >> oh, yes, yes, well, i think -- >> you're outnumbered. three to one. >> i think dr. slawghtser is supporting it. >> i'll give them the opportunity to tell us why it's in the public interest of the united states. we should recommend approval, or do we have the power to decide as the political body of the united states that it shouldn't be permitted to be approved? >> nart, i hope you don't expect
me to tell you the powers of the u.s. senate and legislative process. i'll leave that to you smart guys up there. i'm just a meat processer in the business world. i'm in favor of this transactionment inch it is good for america. i think this is the opportunity that america has been looking for to import jobs. there's been a discussion over the last 20 years about jobs being exported out of the country into china and things made in china and shipped back into the united states. this is the reverse of that. that is china looking to another market to help feed its growing demand and realizing, as the other wnsz indicated, they have a protein shortage, and asia a likely to be protein short for a very long time.
china consumes 40 #% of the pork productions, and asia consumes a substantial portion of the remaining 50%. that's the area of the world where pork is the number one protein. pork is number three in the united states. people in china eat a substantial amount more per capita than in the united states. this is a wonderful opportunity for the u.s. to do what it does best, which is to produce agricultural products and ship those around the world. this helps with the balance of payments of trade, this creates job, this creates opportunities for american farmers to grow. this seems like all the things, if you write down what's positive, this is all the good things in life. america's trying to do. thank you. >> thank you very much. >> thank you very much. senator brown. >> thank you, madam chairman, i appreciate the senator cock ran's --
cochran's line of questioning. do you think the usda should be involved in the review of this proposed deal? mr. pope? >> we absolutely have no objection to that, and support that process. >> okay. >> senator, i would totally support that. it's one of the weaknesses. >> one of the weaknesses is in that it's not -- you don't expect they will decide to include usda in the process? >> as you know, they are not incomed now. the hope is they become a permanent member and maybe some of the other agencies as well. >> especially if it's a food safety issue? >> right, uh-huh. >> mr. pope, we know this is a good deal for shareholders. we know -- the long term benefits for workers and farmers, and i heard what you said to the question, but the long term benefits for workers and farmer and american consumers, to me, are not so clear, but let me ask you
something. financially, what's at stake for you, personally, and for top management in the deal? >> we're on record publicly, and there's a public in the preliminary posture, filing charges, me personally and the senior management team, and so we certainly stand to benefit from this. i'm a shareholder in smith field foods, have been with the company for over 30 years and acquiredded the ownership shares that i have over a very long period of time. the company's done well, and i do stand -- >> could you be more specific with whatever you said publicly and share that with the committee? >> i don't have the numbers in front of me, but if okay with the committee, i'll get you the exact accurate numbers. i'll get that back to you. >> do you have a range? i can't believe you have not heard some of the numbers that will benefit you and top
management at least in some range to share with the committee? >> well, i certainly have -- i certainly am a significant shareholder, so i'm going to receive the $34 a share that every other smithfield food shareholder receives, and equity awards awarded over a very long period of time, and, finally, i got a retention. noferred to -- in order to make sure the management team is in place, there's retention agreements with the top executives to ensure nothing changes, and so those are payable over a three-year period, and they are not payable if the management team does not stay. what i ultimately receive is subject to the management team staying in place and continuing to run the company. >> right. you said something i like. the american business may be the first time in economic history,
that i can see, where the business plan of a large number of companies in one country, our country, is to shut down production in the u.s., move production to a foreign country, china, and then sell back into the original country. i don't know that that's happenedded in -- that i've seen in world history to any appreciateble agree. you're saying that you're -- the flip side of that, i don't know that i follow that, but talk to us, and this question's for both mr. pope and the commissioner. how likely is it that the adoption of the technology allows them to export pork to the united states. i'm concernedded what can happen with the technology in that it does not create american jobs. if you could discuss that.
>> that's the concern that so many have posed is what the opportunity that chinese product some consider to be of lesser standard imported back into the country. i was clear in the testimony that this is all about exports. this is not about imports, and, in fact, chinese products cannot be imported into the united states today, and they have no plans or applications in place, and i have the highest respect for what the u.s. department of agriculture does in this country. in any event, if any application was done, all of that product would be subject to usda standard just as products manufactured in the united states are today, so i wouldn't suspect there would be -- have the same level of scrutiny they manufactured today. i want to be clear. there's no discussion about that. there's a huge protein deficit in that part of the world. this is not about exports product from china to the u.s., but exporting u.s. products to china.
>> may not be today, but we have seen -- this is another issue, but it's also not. we've seen the pharmaceuticals contaminated pharmaceutical ingredients coming from china to the united states in the form of heparin and deaths as a as a re. there's just not the same respect for food safety, drug safety, toys, point, led-based paint on toys, all the kinds of back and forth sales from that country that has not -- have not observed the same standards we have. commissioner, comment on what mr. pope said. >> i think in the short term -- >> be very short. >> in the short term, you'll see, you're not going to see imports, and i think the long term end game here is to dramatically increase production in china. the overriding principle of the chinese is food security through self-sufficiency. they are not dependent upon a foreign country for food so the end game is to get the production up to a certain employee, and historically, look
to toys, paper, all kinds of industry, they over produce and start to export. >> thank you very much. senator b robert? >> thank you, madam chairman. mr. pope, smithfield voluntarily agreed to gurn go a -- undergo a review, and emphasize vol voluntarily, at the time, what were your expectations that the review and i would urge you to respond with regards to the rigorous inner agency review to determine effect on national security. >> r what was your expectation of this? >> we feel it's open to any
agencies within the u.s. government so we did make the submission to ensure that they did the review, to ensure there was not a national security issue associated with this, and i don't want to opine in terms of how they are going to conduct that review. it's done in the confidential way, and they certainly don't share with me what they are thinking. you'll have a better understand -- >> yes, i was going to say that falls under the oversight responsibility, and perhaps that should be the focus of another hearing. did you expect the agriculture committee would hold a hearing? did you expect that? this committee holding a hearing on the acquisition?
>> i don't know that i expected that. >> did you realize you were the victim of a chinese communist plot? [laughter] >> i'm not aware. >> the control of the company somehow to allow china to control the pork industry, are you aware of that in >> senator, i was not aware. >> well, they own our debt. be careful here. given the high demand for safe nutritious pork products in china that you said and other z have as well and agreed to, what will be the impact for the acquisition of american pork producers and processers? talking about growth here. can you be specific in how can others benefit from this? >> senator, that is almost the cornerstone of the rationale for this transaction for america. it's the feeding of the people of the united states, and for
the u.s. producer, this is an opportunity to grow. we, as app industry, struggled with growth in the country. americans are eating less pork today than 15 # years ago, so without the opportunity to grow outside the united states, there is no opportunities for the u.s. pork producer to expand. the u.s. farmer doesn't have an opportunity, doesn't have the opportunity to grow the business. this is it, to the largest market in the world. >> if china is unable to buy american pork, where will they turn to meet their population's demand for additional high quality pork? >> look to other countries. >> what countries? >> brazil, canada, potentially into -- potentially into western europe, although pork production is very expensive in that continent, and so the u.s. is a natural place, and we have
enormous republic, and that's a -- >> what about the consumer in regards to prices at the grocery store in regards to pork products? >> senator, was the question about u.s. consumers -- >> american consumers. >> i don't expect there to be a significant impact of this on a u.s. consumer because we have the ability to expand this business and meet that need. >> one question here for dr. slaughter. welcome back. moving beyond smithfield and the landscape of food and beverage companies, there's talk about this setting the example, and we have an avalanche of foreign investment here. are there other iconic american brands and companies with foreign direct investment, and if so, what's some examples? >> sure, senator. think of automobiles, information technology. those are two industries that have long had a tremendous amount of inward investment into the united states, and strong u.s. companies have undertaken a lot of investment outward to the
rest of the world. >> chrysler and fiat in michigan? >> great example. apple iphone, my briefcase, designed by apple, assembled in china is what it says. i.t. is a great example of an industry where the -- >> what about agriculture? three seconds. >> agriculture as well. business from my hometown, great global end gauged company selling around the world. >> thank you. >> thank you very much. senator johann. >> thank you, madam chairman. just an observation or two before i get to the questions. you know, one the things that american agriculture's facing is that 95% of the world's population doesn't live here. they live someplace else in the world. you're looking at a market like china, it's a growing market, dramatically growing, as a matter of fact, not just a lot of people, but as their standard
of living continues to increase, they're one of the first things they look to is a better food supply. they look to the united states. the other thing about china is that if there's a trade imbalance relative to agriculture, it's in our favor. we sell them more than they sell to us. why? because of some of the things mentioned today. i look at this transaction, and i think, well, could they move production to china? well, they've got a water problem, a very serious water problem. if they can't get water, they can't very well raise corn, and so i just think the problems of moving production are too great for china to overcome over the long term, so i don't see much hostility there. could they move processing to china? well, they certainly have a
labor force, but the product is here, and if they can't raise the product in china, it makes more sense to come here, find the product, find the country where it can be grown. that's here in the united states. i think here's the problem that we're struggling with, and the reality is, just to be very candid, there isn't really a legal mechanism in place that really reviews this much, or that could likely stop it. i appreciate you submitted, and quite honestly, the standard is such that there just isn't much that can be dope here. i suppose congress can act, but if the experience with the farm bill is an indication, that's probably not going to work out too well. you know, the senate might do something, but you kind of wonder what happens at the house, or the house could do something, and you wonder what happens in the senate.
here's the problem in dealing with the transaction, i think, for us, and for the people that we represent. there is something really offensive about the reality that they can do this here, but a very aggressive company like smithfield, this is kind of redesigned pork production in the united states could not do this in china. mr. pope, that's not a hard question. it's not. you know for a fact, you could not do in china what they are doing here with smithfield. the chinese regulators would laugh at you if you said, well, i'll just buy it, and to us, that is just very, very difficult, so how do we do
something here that's realistic, that really gets to the essence of what i think our people are concerned about, and that is that is the food supply going to be protected? are -- at the end of the day, is china going to pick the chinese versus america because they'll now control what percentage of the u.s. pork production -- there's a large percentage, so how do we ensure our people back home that pork will be available, it will be affordable, we will still have the kind of controls that i think they hope we will have? mr. pope, hard question for ya, but how do i go back home and tell nebraska, don't worry, this is a good transaction for ya? >> senator, you're right, that is -- i know it's troubling with
respect to the openness of the u.s. marketplace versus other countries in the world who have different approval processes. i won't speak to whether we could buy the largest -- whether we can buy them or not, but i have not tried, so i'd just be speculating; however, i think there's an important thing here. we have a strong food safety program who under the usda, half the programs we have inside our plants, the integrity of the brands, and the sophistication of the management teams, we have in place in the businesses, we're going to protect these brands, and we're going to protect this business, and if we don't, the u.s. inspectors are going to do it anyway. this is a highly regulated industry. the u.s. government and tight inspections, protocols are in place on every pound of meat we produce in every plant. those on the agriculture committee, you know that. you know how tight those inspection processes are.
that's why people around the world take such comfort in the udsa stamp on product they receive, and they're going to continue to have that ainsurance that anything, regardless of where the ownership is, this country's -- this company's going to operate under the laws of the united states. we're not operating under the laws of china. we're operating under the usda and the food inspection process, and our own developed half the programs beyond that. i think you can -- i think that your constituents back home, it's the same old smithfield, nothing's going to change. this is going to be an american company. we're going to continue to operate like an american company, and we'll continue to protect the brands, the conversations i've had with those people, that this is one of the things they are trying to buy. they want us to help them develop food safety property coals and protect their food supply. >> thank you. >> thank you very much. yes, senator grassley. >> i'm going to start with
dr. haley and commissioner. do you agree with mr. pope's answer to senator robert's question about the benefits of u.s. pork producers and processers to expand and to grow domestically as a result of this transaction? >> no, i don't. i don't think they are buying smithfield for its pork. it's all -- all of smithfield production is 3% of what china produces. they are buying smithfield for the brand name and to have the horrible reputation china has as far as food production goes and export to food, its gene technology, an extremely important industry for china. it's bus stationer -- bullsers by technologies, for its -- because itments to move up into value added production.
it already is in regards to china. >> are you speaking to the point, though, do you think it will expand american production and -- >> i think we will be producing more pork, a std direct -- steady line of pigs going to china, but there's other side effects. for example, competitors will now be dealing with the smithfield that's as inscrutable as any other chinese company. any source of information will not be made public, for example. it'll go through that brass of chinese desemination. the competitors deal with -- >> you answer the question. >> okay, sorry. >> i want to get into some other things. go ahead. >> senator, last year, the chinese cop soup just -- consumed just under 120 billion pounds of pork: they imported 1.5 billion pounds, a little over 1%.
smithfield exported 11.2 -- 1.2 billion pounds of pork. smithfield has the capability to supply the import needs of pork to make up the difference in the chinese economy without any other u.s. pork producer to participate. >> since four -- it's my understanding that pork producers in the united states are processers, control 74% of the market. i'm concerned about anti-trusts and competition issues. ..
compete with the chinese company that has now cost of capital, that has enormous subsidies made available to them, and in effect american companies are not competing with chinese companies but with the chinese government? and they can't win that competition. >> and the chinese government has come out publicly and said that. they said we encourage those acquisitions which is translated means we subsidize. >> dr. slaughter community different point of view in your testimony on that. you disagree with you. it. i would like to have you convinced me when we thought a few years ago that the chinese, whatever, the oil company is, shouldn't buy unocal because we
thought it's against our national interest and maybe even our national security interest. since food is such an important part of national security, why this might not be a problem from that point of view. and you said that the government doesn't have, chinese government doesn't have much to do with this small, you said small company in china. >> so, i think first of all, senator, the review of this transaction is entirely water. i served in government before. the edit agency process works well insidious and i think this is a transaction given its novel that you were precisely careful look make sense. second two i agree with the a lot of what they said about the challenges growing food in china. although i generally disagree and say the major goal for the chinese government here is to maintain social stability. given the demands of their population for safe and cleanly produced food.
>> so you said you didn't think the chinese government has much to do with his company that is like smithfield, but on the other hand, the chinese government is very concerned about social cohesion and all that sort of thing. and so how do you know they aren't pushing the company to buy smithfield? and so the government has got an involvement. the chinese government has an involvement in it. >> the new leaders in china today been explicit about not having what they call more harmonious economic growth focused more on meeting the needs of how cell to families in china. i view this transaction as consistent with that effort to try to bring cleaner growth to china. >> thank you, madam chairman. >> thank you very much. senator boozman. >> thank you, madam chair. and thank you and the ranking member cochran for having this really important hearing. this is something that we've all heard about for a while and you know, we are concerned, the
american public is concerned so it's good to have a discussion. i think all of us are really concerned that you have a huge company in the sense of controlling a good part of the market and then again what is that going to be the effect on consumers, what is that going to be the effect on the american worker is the bottom line. tell me, mr. pope, my understanding of the recent china wants to do this is in the sense that assess been alluded to, they need protein. they need to fork. -- pork. they don't have the green to do that over there. it takes for a five pounds of grain to make a pound of pork so it makes sense to raise the pork where the grain is that. i mean, is that true? >> senator, i think that's exactly true. that's not any different than the way pork and meat is produced in this country.
meet is largely produced where the green is come and china has, has had a policy as many countries have in being so sufficient and feeding the population. however, i think have concluded that's going to be a difficult process. and one solution to that to import the product. >> now again, like i said i'm just trying to understand their reasoning. they send it back in the sense of a lot of it goes back, perhaps i would assume it would. but again, our producers backfill what goes back theoretically, and you still more grain. you some more pics. is that too simple of an understanding? >> i think our producers and some in the room here today with me, have overwhelmingly supported this. the producers -- >> that's a good point. and again i had a visit with some of the large producers
also. where are they at? are the large producers from small producers, are they for this or against it? >> send it to, i don't believe that i've gotten any feedback from any producer who was opposed to this. they are overwhelmingly supportive of this, the opportunity to grow again. i don't know if any producer who is supposed to this. >> mr. slane, you've visited with producers. you know if they are for or against this? >> i have not talked to any, senator. >> that would probably be a good idea. the other thing, too, is that again, to me in hearing we're drifting into all kinds of things. dr. haley, i share your concern of food safety. and yet if we're not doing a good job in that regard because we've got all kinds of stuff coming in here now. and again i'm not saying i'm supporting or against, i just trying to find information. there's a lot of product coming in here right now. and if we need to do better job
of that then we do. commissioner slane, i don't understand innocent, if your argument is we shouldn't do this, allow this to be done here because if we can't do it over there, i mean, there's countries that we deal with that we can't buy property in and yet we allow them to buy property here. i mean, there's all kinds of other situations like that, isn't there, that comes about? i have great fear of the chinese army unit as you're alluding to in the sense i've traveled in africa a lot and understand some of the messes that are used. but apart from that, that's really not a very good argument, is it? >> only in the extent that we should have the same opportunity in these other countries to acquire their companies. there's something fundamentally wrong economically in not
allowing this. and our commission recommended that sithius be modified and that we reject applications where we can't by the same company in that country. >> and again i understand that. and like i said, to me that's kind of a separate deal in the sense that the huge problem we've got in many countries throughout the world. the other thing i would like to ask about, if you are knowledgeable is untold that as far as this being rocket science as far as pork production, that it's really easy, i used to have a bunch of cows, worked the genetics are that way. this is an industry that's a pretty stable industry have access to genetics and things like that, if you want to obtain it, nihcm there's not a great ministry in the feed mix or this or that. is that true?
>> senator, i think in terms of technology i think essentially what we do, we don't have any patent. it's commercially available. >> thank you, madam chairwoman. and again thank you for having the hearing. i think this is very helpful. >> thank you very much. senator thune. >> thank you, madam chairwoman. i appreciate your coming in and answering our questions. i think one of the issues with this acquisition, we are probably not going to see a month from now or a year from now any visible impacts on the nation's livestock industry for our nation's food supply. or food safety for that matter but i think we need to look at these in terms of what the impact will be five years down the road, 10 years down the road, at the nation's food supply might be impacted, how food safety might be impacted. you have 20% of the world's population living in china so obviously food security is high priority. especially if it's only 8% of the world crop land in china. china but to look beyond its
borders to ensure a steady and stable food supply but we've got to ensure that china's food security and adequate supply doesn't come at the expense of ours here in the united states. i want to ask a question, mr. pope, you had mentioned that i think it will be the same old smithfield, only better. and that shuanghui is committed to maintaining operations, headquarters, our relations, producers, labor contracts that are called the brands with highs repetition for food safety. i think we are all encouraged to hear that. at smithfield has been a great asset to the american food supply in the past decades. but i wonder if maybe you could elaborate on any assurances that have been given to business partners, producers, employees, consumers at smithfield will be in fact as you put it the same old smithfield? >> sure. thank you, senator. i would love to address that. shuanghui has been very forthcoming in terms of the
commitment in their public statements on the announcement of this deal of their commitments. so they are well aware that this is a large acquisition going on in the united states and they are well aware of the public overview and concerned about this transaction. so they are very knowledgeable, very thoughtful about what they're committing to realizing that they will be held accountable of that. and the fact that the ongoing support of so many different, so many different organizations and participants in the pork industry have come forward with this, should give you some assurance that shuanghui is going to live up to their commitment. i've known these folks were several years. they have always lived up to their commitments to us. they are the leader in the country, and they are partnering with the leader in the largest pork producer in the world with the largest pork consuming country in the world with the largest processor in that country, the marriage is sort of
very natural and very automatic. in terms of commitment, i'm very grateful for the fact that people like the unions have stepped forward and said we understand, they're going to honor our contracts. our producers in the industry, of the hog producing industry, many have stepped forward and said, we salute this transaction. as well as many of our competitors in the industry have also come forward saluting this transaction. it's good for this industry for the long-term. i've got over 30 years with smithfield and so i have an enormous investment in motion in this company. and i'm going to make sure, i'm still going to continue as ceo of this company and i'm going to have a hand in the future in a way this company continues to operate. and i realize we're going to be held accountable to the american public, and the regulatory process in this country. and i'm very comfortable, shuanghui 100% endorse is that an effect in north carolina pork producers just today we meeting with the chairman in china in
just, just put out a press release in the last few hours complementing their meeting with him and his commitment as the chairman of shuanghui the commitment to maintain the food safety standards that smithfield has in place today. so they are making public statements on the record that they're going to maintain the management team and our operations and a food safety standards. >> mr. slane's testimony identified shuanghui as being adequate chinese state-controlled company, integral. your testimony, you state that shuanghui is a private holding company based in hong kong. would you agree that shuanghui is a state-controlled company? >> now i would not agree, senator, i mean, i think, i think they need to do research. i would ask mr. slane to do the research and maybe got bad information. >> mr. slane? >> chairman wong is a high ranking member of the chinese communist party, and a 15 year
veteran of the national people's congress. he was appointed to the position by the chinese communist party and the answers to the chinese communist party but and if he does not do what they say, they will remove him, or worse, in addition, he controls the majority of stock and the voting rights of shuanghui. and, finally, senator, the bank of china which is controlled by the chinese government is financing this transaction. the bank of china does not finance any transactions unless they're told to by the chinese government. by any definition, this is a state controlled company. >> its subsidy was listed on the stock exchange. you don't get a listing like that without some kind of state support. several government people have come out and said, openly that
they support this acquisition. that doesn't happen unless there's something else going on. >> thank you very much. >> senator heitkamp. >> thank you, madam chairwoman. i apologize for coming in and out. i had another significant meeting to my state, and wanted the chance to listen to all the questioning and i know that a lot of the ground that i wanted to cover has already been covered, and so i just have one quick question of mr. pope. you know, it's always good to get a lot of commitments on the front and when you're negotiating a deal and when you want to make people happy and you want to come before a panel like this and say things are going to go well, but what are the legal requirements that contracts be maintained, that all of the things that have been promised will actually come to fruition now and in the future? or is this just part of what we are talking about now, and tomorrow after the acquisition
is finalized, those commitments go away? >> senator, many of those commitments that i made reference to our legal binding contracts under u.s. law here so they have no choice but to honor the contracts we have with our union employees, as well as the 2000 contracts we have with our contract growers. we have those in place and they have no choice but to honor those contracts, but -- >> no contract is permanent. so what's the termination dates on those contracts be? obviously, senator, those contracts have varying determination dates. but the fact is shuanghui realizes that an important asset they are buying your is the management team in place, our employees in place, and the relationships we have with our growers and our suppliers. they wouldn't be paying a 30% premium to the market without realizing that they're getting a valuable asset.
and the discussion that was being held earlier this year about the potential breakup of this company into parts by some other interested parties created some of this interest by shuanghui, and other interested parties because of the value of this vertically integrated mod model. >> can you stay with any legal certainty that in 10 years you can come back here and say, contracts similar to the contracts that you have today with your growers will be impact and that you will have union contracts in 10 years of? >> senator, obviously, it's difficult for me to project the future. however, as certain as i can be about anything, i am virtually positive we will have the contracts with our contract growers because we don't have a business without them. our contract growers are one of the most important assets this company holds is the ability to work with our producers. that is a key asset beyond the brand that the company owns but that's probably the second most
aboard asset we have. and union, the relationship we have with united food and commercial workers, i would ask you to ask themselves. they have come up so much supportive of the. they are highly confident that the company will continue to recognize them as the unions in place and have contracts that are favorable to their employees, to their workforce. >> you know, not to belabor the point, but i think the concern is that in any testing anything like this that will have a fair level of controversy as you can see from the panel today, there's always a lot of commitments that are made. we like to envision them in 10 years, we'll come back and say, we were right, it all worked out. and i certainly hope that's the case. but just be aware that there is a fair amount of cynicism and concern about this transaction, and part of that is born out of concern for what's going to
happen to the intellectual property of this country -- company. and has you've mentioned over and over again, the only other work that you do, the intellectual product, the know-how that you have, once that has been acquired, as an asset of a chinese company, will we then see that basically undermined pork production in our country lacks and that's the concern. and, yeah, this ground has been plowed and i think the chairwoman for having the hearing but, again, i hope in 10 years you are right. >> thank you very much. want to talk a little bit more about export, because a shining star force in the united states is agricultural exports. we have for every 1 billion in dollars that we invest, we have about 5000 jobs created. so we have a surplus in terms of exports in agriculture, which is very, very important. pork is very export dependent,
correct? you need to export. and right now, if china opened its doors and didn't apply illegal and unscientific food safety standards, you could just export to them, create a lot more jobs. i think that would be terrific. other producers, independent producers that are configured differently than smithfield could do that right now. but that's not what we are talking about. and so my question is, now that shuanghui will have access to smithfield production technology and genetics and improved food safety practices, is it possible and, i'm sure they're going to -- they said that's why they're going to pay a premium for the company. and japan sits right next door, which is our largest export market from the united states. why wouldn't china export to
japan? mr. pope. >> senator, that's a very good question, and certainly it's a concern that the industry has is what china's, japan is a very important market for the pork industry, and you are right again about the importance of exports to the health of the pork industry. i like to say exports have become the lifeblood of the pork industry, and when we don't have a sizable exports, the industry suffers significantly as result of that. today, china could, china could and does, and does export into japan very limited amount. there are very very tight food safety standards between, in japan with respect to, with respect to chinese products. and so they have had to plant approvals. i'm sure you and your staff know that. and so there's been very little. there's been very little but there is some. and so, the thing that gives me
comfort is the economics. pork is substantially more expensive in china than it is in the u.s. that probably surprises many people do that. pork prices are 50% higher in china. it's not a cheaper market. it's a higher market. so that an economic disadvantage in shipping to japan because they don't have the green. they've got to import the grandson of got to have the grain has got to be grown someplace else. it's got to be shipped to china. it any wonder the productivity and that hurts. so the pigs don't stay alive and so it's much more expensive. the u.s. has an economic advantage in selling to japan. and the deficit that exists in china today i think is a very real deficit that i think is an opportunity for u.s. exports. i think they're looking, china
is looking to feed their people. dissatisfied a civil issue that they've got to solve in getting safe food to the people. it's not about an opportunity to import products and export it back out to japan. >> but again, mr. poe, they could feed their people by opening their markets to the great american pork products that we have and, of course, they have chosen, and i understand they would like your brand. it's an excellent brand. one of the concerns or questions i have is whether or not your brand which will be put on chinese pork, which has been less than stellar, and is going to be a problem for your brands down the road. but i wonder if dr. haley and commissioner slane would like to talk about the economics of all of this? >> well, i don't think, as i said before, that china are shuanghui bought smithfield for the pork. it's just 3% of chinese production. but what i see happening, what's
happened in other industries, such as paper, steel, glass, solar. we spent the past five is looking at these industries. higher value added manufacturing renews china. by that i mean processed products and they will use the cfius branding. we will continue to export pork. all sorts of negative action notice such as pollution amounting, perhaps slowly and other interrelated eat industries. their price is going up as well. and we will be exporting more pork but we will be importing more processed foods in china so we we exporting more commodity as we been doing, we currently import 560% more technologically advanced products from china than we export to a. so we will be importing the processed foods and we will be exporting our commodity. and as we will be importing more than we will be exporting, our trade deficit will continue to
grow. china is not seeing this as just one acquisition. it has government support. these companies have government support, and they seek smithfield as a foot in the door. you are going to be very many. i have spoken to people in china and this acquisition is being very carefully monitored. there are other companies that are waiting in the wings to buy more companies. and so, this is a very, this is a weighty decision, and i think this has to be looked at very carefully. what we want to do with the agricultural sector in this country. >> thank you. commissioner slane? >> senator, i think it's important to note that shuanghui has production and distribution systems in japan and south korea. so they're obviously penetrating that market, and with the subsidies from the chinese government i think eventually long-term they could undermine u.s. exports to those markets.
>> thank you. my time is up. if there are other members that have questions. senator thune? >> thanks, madam chair. i just want to take advantage of mr. slaughter's expertise why we're here, and ask a question but i would like to hear any words what you see as the long-term implications of the merger and acquisition on the american food manufacturing industry, and to be more precise, is this acquisition going to be a job creator for american workers? >> thank you, senator. it has every potential to do so, and if i could ago mr. pope's response to question earlier about the long-term. the one dimension which i hope he is wrong is that in five to 10 your smithfield doesn't have 46,000 a place in america. they have 56 or 66,000. most of the growth in the world is outside of the united states. i will echo chairman stab in is nice framing. the number i will give economic
this 22 minute but there's over 22 million unemployed and unemployed americans today. we need to try to great for the next five to 10 years approximately 20 million new jobs in america. and a lot of those jobs ideally will come from american workers and their businesses being connected to opportunities in world markets. and yes there's a lot of concerns about economic development of china but i think engagement of china in the rules-based transparent policymaking process is critical to try to allow american workers like those of smithfield and throughout a lot of other industries to be connected to that growth in china. >> you in your testimony mentioned foreign direct investment in the long-term as being a boon to the american economy. i'm wondering if you see any situation which foreign director investment might be a detriment, or be an untenable risk to the american economy? >> so anytime there's a foreign investment that raises a
legitimate national security concern for america. that foreign investment should be looked at closely. if not forbidden to again i think the cfius process has decades of being a well-run and well managed process for doing those concerns. clearly individual transaction sometimes don't work well for the parties involved. but when you look at the clear historical record for america over decades, like this particular transaction, has generated large benefits for american workers and the broader economy. >> okay. thank you, madam chair. >> thank you very much. i think this is been a very important and very thoughtful hearing. and very informative. i appreciate everyone being here today. we have a number of issues that have been raised, and i think from my perspective i remain concerned about the adequacy of our governments review process for these acquisitions of our food supply. i really believe this is a
precedent setting case. i'm concerned when dr. haley talks about more waiting in the wings to come, which just says to me that we need to be thoughtful on behalf of american consumers and producers in the broader economy to make sure that we are looking at the adequacy of the review processes, and what's in the best interest of our country. but we, i want to remind the members that we are going to be with the treasury department. we are going to be going across the hall now to meet with those that are involved with this review process. and we will have questions for them as well. any additional questions for the record should be submitted to the committee clerk by five business days from today. that's 5 p.m. on wednesday, july 17. and again, this is important. i hope that we will continue to see a strong, robust pork industry in america. and that we will continue, and i've no doubt that our standards will remain high in this
country. and we certainly want all the right things to happen. ..